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Credit & Risk Management

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q4 2017

• Article by BRUIN Financial

CREDIT & RISK MANAGEMENT MARKET COMMENTARY, Q4 2017

MARKET OVERVIEW

In previous years, it would not have been unusual to see the declining temperatures coincide with the recruitment industry approaching a period of hibernation in December. However, this year has seen Q4 keep pace in the job flow stakes, particularly at the junior/mid level. The Credit, Risk and Quantitative Analytics desk saw a remarkable flow of new roles right up until the final days before Christmas, as firms sought to wrap up hires quickly before the New Year, and set the wheels in motion for recruitment processes in Q1 2018.

2017 has been a year of significant growth for this desk. We have taken on 36% more mandates than 2016 and have grown our own headcount to accommodate this. We have expanded our coverage into the markets of Cyber Security, IT Risk and Data Science; and are taking on an ever-increasing number of roles in Europe.

We’d also like to take this opportunity to introduce Katherine Williams, our new contact for Contract engagements. Katherine joined from a competitor and has previously covered engagements across Credit, Market and Operational Risk, and will be mirroring our Permanent coverage. Katherine is fluent in Portuguese and has a BSc in Broadcast Journalism from the University of West London.

 

Role Profiles

Credit Analysis and Research

Across both buy and sell side there was significant demand for candidates with experience of Real Estate transactions in Q4. Sell-side firms sought to amortise existing Real Estate teams with more junior hires, whereas on the buy side there was a clamour for mid-level candidates with this exposure. It is anticipated that the machinations of Commercial Real Estate investment will be altered significantly in 2018, as a result of both technological advances and regulatory change; therefore we expect hiring in this space to be very busy next year.

Q4 saw an increase in hiring from our Brokerage clients in the Credit space, whereas Investment Banking was relatively quiet compared to previous quarters. However, we expect the IB bonus rounds to precipitate an influx of replacement hires in the New Year. On the buy side, job flow maintained a stable rate, with High Yield analysts courting the most attention from clients.

Technology / Cyber Security

As viewers of a certain BBC reality television show will be aware, this is anticipated to be an enormous growth market in 2018, and Q4 saw the number of new roles going to market in this space increase drastically, particularly within Asset Management. Given the polarised nature of prospective candidates in this space between the junior and senior end, it is no surprise that firms have experienced difficulty hiring candidates at the mid level of seniority.

BRUIN’s specialist consultant in this field, Arjaree Shackleton, and Researcher David Lewis, have invested countless hours mapping the market for candidates in this space in 2017, and would be happy to have a conversation with any professionals in this space from a job search or hiring perspective.

Operational Risk

From a hiring perspective, Q4 was relatively quiet for firms across both buy and sell side. Most activity was seen across the 2nd line of defence in Investment Banking. Normally we see a flurry of activity in Q1 in this space as bonus payments spark natural attrition, however a major shake up of Operational Risk Capital calculation rules announced by the BCBS in December are sure to have a significant impact on the hiring market in 2018 as Banks react to these new measures.

Patrick McConnell’s excellent LinkedIn article “The Death of Operational Risk Management” deliberates further on the potential future of ORM functions under the new regulatory requirements, and only time will tell how these will affect the hiring landscape going forward.

Investment Risk

Undoubtedly Investment Risk was a very active area in 2017. A large number of placements were made from Analyst (entry level) up to ‘Head of’ level and everything in between, Clients were bulking up their risk divisions across all asset classes with Equities being the busiest in H2. With the majority of strong Investment risk candidates being plucked from the market earlier on in the year, those firms hiring later on in 2017 had to be slightly more patient and flexible in their approach when finding technically relevant/suitable candidates. This resulted in candidates being hired from system vendors or investment banks where the clients preference would have been to hire a ‘like for like’ from a buy side competitor.

With many firms getting up to speed and looking to enhance and improve their risk management frameworks a number are, or will be, implementing new risk systems. This means candidates with specific systems/implementation experience will be highly sought after and firms will have to pay a premium to attract excellent talent in this space. We expect Investment Risk in 2018 to continue to be busy. Due to the fact many Investment Risk candidates have recently moved and the pool of candidates with this direct experience is relatively narrow we would urge clients to take a flexible approach when on the look out for Investment Risk candidates.

Market Risk

Market Risk in Q4 saw a steady influx of jobs at the junior/mid level within Investment Banking. In particular demand were candidates with strong knowledge of Structured Products, particularly those in Fixed Income. Whilst some firms were successful in sourcing these candidates directly, given the niche nature of the product coverage required we were able to add significant value to the searches at many IBs in Q4.

One trend that was notable in Q4 was that firms were more open to seeing candidates with exotic product experience from a product control background, either to move directly into a desk-facing role, or to roles in Market Risk control functions. Whether this will continue in 2018, as more candidates with the direct MRM experience come to market after bonus payments, remains to be seen.

Quantitative Research

As previously alluded to in the Q3 edition of this commentary, we are seeing a number of traditionally fundamental Asset Managers start to take advantage of the abundance of data in financial markets and adopt a more “Quantamental” approach to investing. This quarter has seen a number of firms hire professionals to build out new Quantitative Research functions, and we expect this to continue into 2018.

In the Systematic Hedge Fund space, we experienced a slowdown in the release of new roles, with firms starting to look towards 2018 and bonus season as the time to make hires, both replacement and opportunistic.

Quantitative Analytics

On the sell side, the Quant space saw increased demand for candidates from a statistical modelling background that have looked at models pertaining to Economic Capital and Stress Testing. We have also seen an increase in demand for candidates with strong knowledge of Stochastic and Ito Calculus.

We have seen over the course of this Quarter that many large organisations looked to build or supplement existing functions outside of London in 2018; be that in the UK Regions or beyond. Our UK Regional desk has worked with some of the larger banking organisations in 2017, and we have also worked mandates in Continental Europe in Q4

Regional Risk – UK

Over the last quarter, the Regional desk worked predominantly on roles in the Modelling, Cyber Risk and IT Risk space. Traditionally these roles have been based in London, but more recently clients have decided to move a number of these roles out to the regions, a trend we expect to continue in 2018. It also appeared that there was a shortage of candidates in these areas from a regional perspective which made recruiting for these roles challenging. As a result we had to look at candidates in the London and other nearby regions that were happy to relocate.

 

WOMEN IN RISK

Since BRUIN Financial committed to providing balanced shortlists of male and female candidates for roles, we have seen a year-on-year increase in the number of female candidates we have placed in roles in Credit, Risk and Quantitative Analytics from 28% in 2016 to 36% in 2017. Among their number included a Head of ICAAP Risk and a Head of Industrials Credit Research.

Another trend has been a greater representation of female candidates at the junior end of the spectrum across Operational, Market / Investment and Enterprise Risk. Going in to 2018, we expect to see a further rectification of the imbalance of male/female hires, as the Gender Pay Gap Reporting legislation comes into effect. A recent article in the Financial Times highlighted that the gender pay gap in

financial services is the worst of any sector in UK commerce, which shows there is still a long way to go in the journey towards equality.

BRUIN recently held an event in partnership with The 30% Club and Women Ahead, a  diversity mentoring specialist at M&G’s offices. This event was held in November to explore the innovative strategies being used by firms to attract and retain women in City and address the challenge of gender imbalance within financial services, with over 100 financial services professionals in attendance. This event complemented another recent event held at M&G’s offices focusing on Women Returners for the Diversity Project, for which BRUIN is represented on the Steering Committee.

 

THE BONUS COUNTDOWN CONUNDRUM

One of the consistent frustrations heard by our team from candidates is a lack of progression and development opportunities at their current employers. Consequently, those who find themselves in this situation are seeking to leave to do something they haven’t done before, be it working in a different type of organisation, or a similar organisation covering different work.

However, in the majority of cases, candidates in this situation are still expecting pay increases which are commensurate with moving to a like for like role, which is extremely unlikely to be achievable. Going in to 2018, we would urge those candidates who are looking to progress their careers in new fields to be flexible around compensation to achieve this.